DES MOINES, Iowa — Motor home manufacturer Winnebago Industries Inc. said Thursday that its profit rose about 26 percent in the first quarter as more customers bought more profitable high-end motor homes and the company spent less on promotions. It also boosted its dividend and its shares rose more than 4 percent in afternoon trading.

The Forest City, Iowa-based company reported a profit of $10 million, or 34 cents a share, in the three months ended Dec. 1, up from $7.9 million, or 25 cents a share, a year ago.

Sales increased 6.6 percent to $215.1 million from $201.8 million in part because of an additional week in the quarter.

The recreational vehicle industry has faced a difficult market in the past few years as fuel prices and interest rates climbed.

Winnebago CEO Bruce Hertzke said he was pleased with the quarter, which included higher sales of Class A motor homes, a turnaround from recent quarters in which consumers had been buying lower-cost and lower-profit smaller units.

The company repurchased 676,000 shares of common stock for $17.5 million during the quarter and declared a dividend of 12 cents a share, up from 10 cents a share declared in the first quarter a year ago.

The company said the industry continues to see softness in motor home sales and the seasonally slow second quarter is likely to reflect that.

President Bob Olson said in a statement that industry surveys indicate sales down 8.9 percent for October and 5.2 percent for the calendar year through October 2007 compared with last year.

“Consumer confidence remains weak and we believe it will take some time for the recent interest rate cuts to have a positive impact on our market,” he said.

Chief Financial Officer Sarah Nielsen said lenders indicate they’ve tightened loan requirements and report a slight increase in the number of defaults. RV loan defaults are still less than 1 percent of loans granted, she said.

Stricter policies on consumer lending doesn’t mean most RV customers can’t get loans because the average RV buyer is 55 years old with a very strong credit record, she said.

“I think there’s some tightening going on and a little bit of an uptick on delinquencies,” she said.

The average selling price for a motor home was $92,627 for the first quarter this year, up 8.6 percent from $85,257 in the same period a year ago. The largest diesel-powered units sold for an average $173,093 during the quarter, up about $10,000 from a year ago.

Hertzke said the RV industry looks to England to see some long-term hope. Consumers there have paid much higher prices for fuel yet the motor home industry has been robust for the past three or four years, he said.

“We believe we will need to develop more fuel-efficient products, maybe a little bit smaller, not always what Americans want,” he said. “That’s what we kind of see for trends in probably the automobiles and RVs.”

An example is the new Era, a motor home built on a Dodge Sprinter cargo van chassis powered by a 6-cylinder turbo-diesel engine that carries a fuel rating of 22 miles per gallon. Winnebago introduced the product at a trade show last month in Louisville, Ky., and expects to begin production in the second quarter and delivery to dealers in early March.

Winnebago manufactures and sells more than 90 different models of motor homes under several brand names including Winnebago and Itasca.

Hertke said the company produced its 400,000th motor home last week and observes its 50th anniversary in 2008.

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